Even though it proposes a dip in spending for defense and domestic appropriated programs, the budget President Obama unveiled this week continues to lean on new revenues, avoid entitlement reforms, and rely on rosy economic assumptions to a greater extent than many taxpayers mightbelieve, according to National Taxpayers Union Foundation’s (NTUF’s) analysis.

“It is therefore no wonder that plans for hundreds of billions in revenues are littered throughout the thousands of pages in new documents the Administration has offered,” said Brady.

Highlights of the NTUF analysis of the President’s Fiscal Year 2013 budget include:

Unusually Sunny Revenues Are Forecasted. Receipts are projected to rise steadily every single year as a percentage of Gross Domestic Product, reaching 20.1 percent of GDP in 2022. Revenues have only exceeded 20 percent of GDP once since World War II, and have only grown as a share of the economy over multiple years in two postwar periods (1978-1981 and 1993-1998). The White House also assumes a sharp upward spike in corporate income tax receipts of 81 percent in two years (Fiscal Years 2012-2014). The last time a jump in corporate receipts approaching this amount occurred was between 2003 and 2005 – ironically, when the Bush Administration was reducing tax rates, largely for individuals but also on items like dividends.

Some Spending Slows, But Overall Outlays Still Grow. Discretionary spending in both the military and the non-security areas will fall in absolute terms (rather than grow less quickly) between FY 2012 and FY 2015, by roughly 14 percent for each component. Spending on these programs will then begin to climb slowly again. Yet, mandatory expenditures (Social Security, Medicare, Medicaid, etc.) would rise consistently. Thus, total federal spending in all categories would jump from $3.8 trillion this year, pass $4 trillion in 2015, exceed $5 trillion in 2019, and begin closing in on $6 trillion by 2022. After two years of modest growth, outlays would increase by a yearly average of 5.2 percent between FY 2014 and FY 2022.

Budget Reductions: Old, New, and Borrowed. This year, the President renamed the traditional “Terminations, Reductions, and Savings” document within the budget, calling it “Cuts, Consolidations, and Savings.” The moniker may be different, but many of the contents look awfully familiar. Of the 140 proposals we identified that pertain to discretionary (i.e., annually appropriated defense and domestic) spending, 42 were included in last year’s “Terminations, Reductions, and Savings.” The phenomenon is even more pronounced with the savings proposals pertaining to mandatory programs (e.g., entitlements). Of these 28 items, 21 are retreads. Almost three out of every five dollars in reductions offered in this area of the budget would come from payment cuts to Medicare providers – a controversial issue.

Mixed Message on Tax Reform. On one hand, the President’s latest budget calls on Congress to “immediately begin work on corporate tax reform that will close loopholes, lower the overall rate, encourage investment here at home, and not add a dime to the deficit.” Yet, elsewhere in the document, the Administration would punish successful, job-creating industries, such as oil and gas, with higher taxes. Many of these proposals move in the opposite direction of tax simplification and neutrality. One proposal would repeal the Section 199 domestic production activities deduction, which is available to a wide variety of businesses, but would do so only for certain oil and gas firms. Boosting these firms’ tax liabilities could have many negative effects, including higher energy prices, fewer employment opportunities, and, ironically, lower tax receipts of other types due to reduced economic activity.

Hidden Taxes. One of the most deceptive revenue-related portions of the budget aims to replace the current Passenger Security Fee of $2.50 per enplanement ($5.00 maximum per one-way trip) with a new structure establishing a minimum one-way fee of $5.00 ($7.50 by the year 2018). While the Administration labels this proposal a “user charge,” about 70 percent of the $25.5 billion collected from this change over the next decade would be counted as “mandatory savings” for deficit reduction. Even without this tax hike, an airline ticket can carry a government tax and fee load of over 20 percent.

Hidden Spending. Many of the Administration’s tax credit proposals are refundable, meaning that an individual or company can get more money back than they originally paid in tax. The Treasury counts this refundable portion as an outlay rather than foregone revenue. According to NTUF, the 12 refundable credit proposals in the budget would boost federal spending by $157.1 billion over 10 years.

Hidden Cost Shifts. In a quest to “align Medicare drug payment policies with Medicaid policies for low-income beneficiaries,” the budget would extract $155.6 billion (over 10 years) in “rebates” from pharmaceutical makers, which would be deposited into the Treasury, not into Medicare beneficiaries’ pockets. Such a policy amounts to a levy that establishes federally mandated price controls on another share of the prescription drug market. This cost shift means that something else – such as patients in private plans or the ability of companies to develop new lifesaving drugs – will suffer.

Debt Service Costs Are Poised to Soar. Between FY 2012 and FY 2022, net interest paid by the federal government (which includes debt service) will have skyrocketed by 278 percent. In just five years, (2012-2016), net interest is projected to more than double.

“Many taxpayers may be wondering whether the President’s latest fiscal blueprint marks the beginning of a new budget season or the beginning of a new phase in the campaign season,” Brady concluded.

“While Congress is certainly not immune to similar charges over its own budget votes, one thing is becoming clearer: with only a brief respite from some spending increases in sight, looming tax increases, continued deterioration of entitlement programs, and the ever-present threat of another sovereign credit downgrade, more than a few Americans likely want answers from both ends of Pennsylvania Avenue on fiscal policy before rather than after the election.”

For additional analyses of past Presidential budget proposals and State of the Union speeches, visit www.ntu.org.

NTUF is the research affiliate of the 362,000-member National Taxpayers Union, a non-profit taxpayer advocacy group founded in 1969.

THE COW AND THE ICE CREAM — ONE OF THE BEST EXPLANATIONS OF WHY OBAMA WON THE ELECTION IN 2008: — Adapted from a story by a teacher in the Nashville area.

It’s not about “the cow” (our country); it’s all about the “ice cream.” The most eye-opening civics lesson I ever had was while teaching third grade… The presidential election was heating up and some of the children showed an interest. I decided we would have an election for a class president. We would choose our nominees. They would make a campaign speech and the class would vote. To simplify the process, candidates were nominated by other class members. We discussed what kinds of characteristics these students should have. We got many nominations and from those, Jamie and Olivia were picked to run for the top spot. The class had done a great job in their selections. Both candidates were good kids. I thought Jamie might have an advantage because he had lots of parental support. I had never seen Olivia’s mother.

The day arrived when they were to make their speeches. Jamie went first. He had specific ideas about how to make our class a better place. He ended by promising to do his very best. Everyone applauded and he sat down.

Now it was Olivia’s turn to speak. Her speech was concise. She said, “If you will vote for me, I will give you ice cream.” She sat down. The class went wild. “Yes! Yes! We want ice cream.” Surely she would say more. She did not have to. A discussion followed. How did she plan to pay for the ice cream? She wasn’t sure. Would her parents buy it or would the class pay for it? She didn’t know. The class (the voters) really didn’t care. All they were thinking about was “ice cream!” Jamie was forgotten…and Olivia won in a landslide!

Every time Barack Obama opened his mouth during the 2008 campaign, he offered “ice cream,” and 52% of the people reacted just like nine-year olds. They wanted “ice cream.” The other 48 percent knew that THEY were going to have to feed “the cow” and clean up “the mess.” Entitlements, bailouts and other goodies are the flavors of “ice cream” that Obama promised the people in return for their vote!

Remember, the government cannot give anything to anyone that they have not first taken away from someone else. Did you vote for the ice cream? THAT, MY FRIENDS, IS HOW OBAMA GOT ELECTED in 2008; and he’s still promising more in a second term. $6 trillion (the amount of new debt that this has been amassed by this administration since Obama took office) has bought a lot of “ice cream”…or should I say votes.

Radman9:32 am CST
February 16, 2012

John Stossel’s article, “Never Trust Government Numbers” — in this edition of Texas Insider –speaks of the “ice cream,” and the increasing costs of double and triple scoops:

“Again and again, politicians get away with underestimating the cost of their programs.

Often the cost goes up because people change their behavior to get free stuff. A program meant to help the needy costs a certain amount. The next year, it costs more, because now more of the needy know about the program and more social workers know how to tap it. The next year, the non-needy feel like suckers if they don’t get the handout, and they figure out a way to game the system.”

And, “‘what do politicians do the next year? They expand the program to buy more votes. And the year after that, they add a new benefit. That’s what’s happened with Medicare. It’s not just that they got the fundamental estimates wrong. They did. But every new generation of politicians figures out some new expansion, some new benefit.’”

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